Boston Chauffeur Driven Show
Monday, June 24, 2019

BY ANDI GRAY

Andi Gray small business Dilemma: As an owner, I feel like I’m always looking over my shoulder, wondering what will get in the way. I’m hoping you could provide some advice on things to look out for, and what to do about them.

Thoughts of the Day: Major issues can get in the way of success. Be smart about how you grow your company.

1. You don’t have the right people
Counsel employees about the importance of keeping up with change. Regularly review skills company-wide. Post jobs to assess talent availability, and build individualized training plans. Look for gaps requiring new hires.

Make it a privilege to work for your company—one that is earned. In return, give your workforce the opportunity to grow and show what they’re capable of, and promote people who demonstrate values of ambition, drive, teamwork, honesty, and commitment to the company’s future.

2. The market has moved on
Engage every department in looking for new markets and new ways to serve existing clients. Ask customers what else they need. Get vendor updates on what’s new. Attend trade shows for new ideas.

Commit funds for marketing. Expand profits by selling new products to old customers and old products to new customers. Look 5-10 years down the road.

3. Cost to deliver has changed and you haven’t raised prices in a while
Do annual cost reviews. Put someone in charge of negotiating for discounts with vendors, and always be on the lookout for ways to do things more efficiently. Remember, however, that cost-cutting only goes so far.

Eventually, you’ll have to increase prices and pass along price increases. It’s better to do little price increases each year versus one big increase every few years. If customers balk, beef up marketing to look for new opportunities. Keep an eye on what competitors are doing but stay away from price wars—nobody wins. Define a niche, a specialty, an add-on, something that makes your product or service more appealing.

4. You don’t have a good handle on the finances of the business
Learn how to read both a balance sheet and income statement. Build KPIs (key performance indicators) and teach everyone in the company to use reports to quickly spot problems. Use budgeting tools and estimate costs that vary as sales volume goes up or down. Know how much you need to cover overhead and R&D. Forecast peaks and valleys and know when you’ll need cash. Build in margin for taxes, loan principal, shareholders and employees, and reserves. Tie salary increases and bonuses to company profits, not revenue.

5. Theft, loss, and waste
We all like to think that we have good people we can trust on our staff. And for the most part, we do. As things get busy, it’s easy for stuff to slip by. Use tools and rules to help keep good people from doing stupid things. Let people know you want what’s best for everyone. Wasted hours, lost materials, and accidents mean less profits to share. When there is a problem, address it swiftly. Line up the facts, and get employees involved in resolving problems. Don’t let things slide.

6. Not enough of the right sales
Some clients are your company’s future, some are its past. Look for customers who are forward-thinking, well-run, well-funded, and concerned about the health of their vendor partners. Give them top priority. Look for late-payers and low-margin accounts who demand a lot and don’t want to pay for the privilege. Replace them.

7. Not enough capital
Every business needs reserves: Three months of overhead is good but six months is better. We call it the “sleep at night” fund. Don’t try to pay down credit lines quickly at the expense of cash on hand. Put $1 toward each. Build up current assets as you reduce current liabilities. Ask your banker to explain the ratios they look at to assess the health of your business. Set goals to improve those ratios. Build up hard assets, such as owning a building, that can back-stop your lending needs. [CD0115]

 

Looking for a good book?
The Facts of Business Life: What Every Successful Business Owner Knows That You Don’t by Bill McBean